Note: Walton Francis testified on the USPS' solvency problems on March 27th, 2012 for the Committee on Oversight and Government Reform. His testimony can be found here, or under "Event Materials" below.
In October, the Obama administration announced plans to take control of Federal Employees Health Benefits Program (FEHBP) prescription drug purchases; rather than allowing each participating health plan to negotiate independently with drug companies, the government would negotiate on behalf of all plans in the FEHBP using a single pharmacy benefit manager. This represents a significant change in operating procedure for this long-standing federal institution. Wednesday morning, James W. Morrison, former administrator of the FEHBP, and Walton Francis, primary author of CHECKBOOK’s “Guide to Health Plans for Federal Employees,” joined AEI’s Joseph Antos at AEI to discuss the various flaws of these two proposals. Morrison explained that health plans integrate pharmacy benefits with the medical benefits they provide; imposing one set of pharmacy benefits on all of the plans unwisely ignores the complex interaction between the benefit components of each plan. Francis added that the proposal would require the government to decide FEHBP’S formulary, subjecting the decision to politics. Antos contradicted the administration’s claims that the proposal would bestow greater purchasing power on the FEHBP’s single pharmacy benefit manager, adding that it would be impossible for politicians to determine a “fair” price for a given drug. The proposal sets in motion a dangerous direction for the Patient Protection and Affordable Care Act, giving the appearance of competition while allowing the government to enact top-down controls.
The Federal Employees Health Benefits Program (FEHBP) was a successful health insurance exchange decades before the term was coined. It offers federal employees an informed choice among competing health plans and is the model for President Obama’s health care reform. Recently, the financially troubled US Postal Service proposed pulling out of FEHBP in the hope of saving money by running its own program. In addition, the administration wants the government to directly purchase all prescription drugs sold through FEHBP rather than allowing health plans to negotiate their own prices and compete on the exchange. Would these moves reduce the cost of providing health benefits to federal workers? Would enrollees continue to have plans that meet their health needs without limiting access to their prescriptions? Or are these the first steps in dismantling an effective market-based health insurance program? An expert panel will discuss the impact of these proposals to restructure FEHBP and what they imply for both the survival of the program and the broader health system under the president’s health care reform.